Ethical, responsible, and sustainability-themed exchange-traded funds (ETFs) held $11.47 billion in funds under management across 57 funds at the end of 2023, according to the latest data from Betashares.
At the beginning of last year, the same category held $9.2 billion in funds under management (FUM) across 52 funds.
Moreover, net flows to ethical and responsible ETFs reached $824.6 million over 2023.
Greg Liddell, responsible investments director at Betashares, noted that investors continue to allocate to ethical and responsible ETFs amid the “fastest rate hiking cycle in a generation”.
“The growth in ethical and responsible investing via ETFs is an ongoing trend that is driven by investors and their financial advisers seeking to meet their complementary goals of aligning their portfolios with their values and long-term wealth creation,” Mr Liddell said.
As part of this trend, he observed, more investors and their financial advisers are building sophisticated ethical portfolios using this growing class within the ETF universe.
“These related trends pushed assets under management in ethical and responsible ETFs to a record $11.47 billion.”
“As investors and financial advisers become more familiar with ethical investment options, we are pleased to see them become more discerning about how they deploy capital to these investment options.”
With this, Mr Liddell said, comes an increasing inclination for investors to “look under the hood” of these ETFs before they invest.
“As investors and their advisers become more astute, we expect they will increasingly differentiate on the credibility of responsible investment claims when it comes to allocations to ethical and responsible investment options.”
As such, Betashares encouraged investors to “do their homework” before investing in any fund that claims to be ethical or responsible.
This, Mr Liddell explained, can be done by reviewing the actual holdings of the product and assessing whether those holdings are consistent with their values and principles.
“Looking ahead to 2024, we expect continued growth in the amount of assets held by ethical and responsible investment ETFs, particularly as net inflows to this category edge closer to levels seen in previous years,” he concluded.
Earlier this week, Betashares forecast that the total FUM of the Australian ETF industry will exceed $200 billion at the end of this year, with the potential to reach $220 billion depending on market conditions.